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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Demand for a resource like labor is derived from the demand for the goods produced by the resource






2. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






3. Entry of new firms shifts the cost curves for all firms upward






4. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






5. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






6. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






7. All firms maximize profit by producing where MR = MC






8. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






9. Models where firms are competitive rivals seeking to gain at the expense of their rivals






10. The difference between total revenue and total explicit and implicit costs






11. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






12. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






13. The price of a good measured in units of currency






14. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






15. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






16. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






17. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






18. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






19. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






20. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






21. ATC = TC/Q = AFC + AVC






22. Ed > 1 - meaning consumers are price sensitive






23. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






24. Es = (%dQs) / (%dPrice)






25. A good for which higher income increases demand






26. Entry (or exit) of firms does not shift the cost curves of firms in the industry






27. The output where ATC is minimized and economic profit is zero






28. The mechanism for combining production resources - with existing technology - into finished goods and services






29. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






30. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






31. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






32. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






33. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






34. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






35. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






36. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






37. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






38. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






39. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






40. Two goods are consumer substitutes if they provide essentially the same utility to consumers






41. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






42. The lost net benefit to society caused by a movement away from the competitive market equilibrium






43. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






44. Ed < 1






45. Ed = 1






46. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






47. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






48. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






49. The change in quantity demanded resulting from a change in the price of one good relative to other goods






50. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power







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